Institutional investors may overlook China International Capital Corporation Limited's (HKG:3908) recent HK$6.0b market cap drop as long-term gains remain positive

Key Insights

• Institutions' substantial holdings in China International Capital implies that they have significant influence over the company's share price
• A total of 5 investors have a majority stake in the company with 51% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

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Every investor in China International Capital Corporation Limited (HKG:3908) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 50% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to HK$136b last week. However, the 70% one-year return to shareholders may have helped lessen their pain. We would assume however, that they would be on the lookout for weakness in the future.

Let's take a closer look to see what the different types of shareholders can tell us about China International Capital.

View our latest analysis for China International Capital

What Does The Institutional Ownership Tell Us About China International Capital?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in China International Capital. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at China International Capital's earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in China International Capital. The company's largest shareholder is Central Huijin Investment Ltd., with ownership of 40%. Tencent Holdings Limited is the second largest shareholder owning 4.5% of common stock, and Alibaba Group Holding Limited holds about 3.0% of the company stock.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of China International Capital

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders own under 1% of China International Capital Corporation Limited in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own HK$4.3m of stock. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 40% ownership, the general public, mostly comprising of individual investors, have some degree of sway over China International Capital. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Public Company Ownership

Public companies currently own 7.5% of China International Capital stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand China International Capital better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.